Peter Garrett (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Reconciliation and the Arts) Share this | Link to this | Hansard source

I move:

That this House.

(1)

notes that:

(a)

microcredit is a particularly effective and sustainable means of eradicating poverty;

(b)

microcredit borrowers, particularly women, generate income that allows them to feed, clothe, educate and care for the health of their children;

(c)

to date 66.6 million people in the world have been reached with microcredit services;

(d)

Goal 1 of the Millennium Development Goals (MDG) seeks to eradicate poverty, while its 2015 target is to reduce by half the number of people living on less than $1 per day;

(e)

if the new Microcredit Summit goal of having 175 million of the world’s poorest families receiving microcredit were reached by 2015, then nearly half the MDG target would be met;

(f)

Australia spent $14.5 million on microcredit in the 2005-06 Aid Budget, which is 0.6% of the Aid Budget; and

(g)

the USA, which funded microcredit longer than most donor countries, has established an international benchmark for microcredit spending, being 1.25% of the aid budget;

(2)

urges the Australian Government to agree to support the new Microcredit Summit goal of having 175 million of the world’s poorest people receiving microcredit by 2015 as a means of achieving the MDG; and

(3)

urges the Australian Government to increase the proportion of money it allocates to microcredit to 1.25% of the aid budget.

This parliament, through the agenda set by the government, does not focus sufficient time or resources on the pressing issues of resolving and reducing global poverty, despite the fact that it remains one of the most important and critical issues of our time. And it is one of the glaring deficiencies of the government’s aid budget that the allocation for microcredit programs is so paltry. The government likes to emphasise the importance of trade reform in its aid budget, but its approach lacks balance. Despite recent increases in our aid budget, we still sit at the bottom of the league of equivalent countries in giving aid, and programs which can provide a direct means of enabling people to loosen the bindings of circumstance and conditions where poverty is the norm must be given priority. My colleague the shadow minister for overseas aid and Pacific island affairs will speak to these matters subsequently.

Microfinance, or microcredit as it is also known, is the provision of small loans and other financial services to the very poor. As the report by poverty advocacy group RESULTS, released in December last year, noted, microcredit is considered the best tool we have to reduce poverty amongst the very poor. Recent estimates suggest that up to 1.2 billion people worldwide, which equates to around 250 million families, live on less than $US1 a day and are subsequently considered ‘very poor’. Consequently this motion concerns the need for the government to expand its commitment to microcredit and so provide additional numbers of impoverished people in our region and beyond with the means of breaking out of the very difficult situation they face. Microcredit has, since the 1970s, grown as a proven and constructive way of getting people started along the road to economic sufficiency. By making small loans, usually without security, to people to enable them to start up small businesses, opportunities are created—often taken up by women, who are powerful actors and agents for development—a circuit breaker emerges and the cycle of poverty can be broken and people’s lives improved as a result.

Analysis by the World Bank has clearly shown that increased access to financial services does help to directly reduce poverty and explains why the provision of microcredit is considered such an important tool in the tool kit for action on poverty. This motion follows on from the highly successful United Nations International Year of Microcredit in 2005, which saw increased focus on this very practical way of addressing poverty in poor nations.

This motion reflects the desire in this parliament and of many in the broader Australian community for the Australian government to effectively address the Millennium Development Goals and to make poverty history. One key means of doing just that is to substantially increase the support that is given through the aid budget for microcredit. The Parliamentary Secretary for Foreign Affairs and Trade is on the record as saying that he is all for microcredit and that he is optimistic we are going to see more support going into this area. It is time these words were turned into action by the Howard government.

At this point in time microcredit takes up a tiny segment of the Australian aid budget, representing less than 1c of every aid dollar spent. We must do better. This motion calls on the government to expand the funding provision for microcredit from the current figure of 0.6 per cent of the aid budget to 1.25 per cent, an increase to around $25 million—not a large sum in comparison with the aid budget.

Consistent with the millennium development goals of halving the number of people living on less than $1 a day by 2015, such a commitment would see Australia meeting the target identified by the microcredit summit of extending microcredit to 175 million of the world’s poorest people. It is estimated that it would reach nearly half of this millennium development goal. The United States, as noted in this motion, has established a benchmark of 1.25 per cent for microcredit. There is no reason why Australia should not do the same.

This motion is about financial access for poor people. It is about providing people not with a handout but with a hand up. Access to microcredit enables self-sufficiency. It provides the means for people to produce income and to improve their health, their nutrition, their housing and their overall development. It works, as shown by the example of poverty reduction in Bangladesh, where microcredit programs have been well established for some time, and our aid program needs to respond now to this proven and practical means of addressing poverty. I commend the motion to the House. (Time expired)

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Is the motion seconded?

Bob Sercombe (Maribyrnong, Australian Labor Party, Shadow Minister for Overseas Aid and Pacific Island Affairs) Share this | Link to this | Hansard source

I second the motion and reserve my right to speak.

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

At the outset I would like to congratulate the member for Kingsford Smith on proposing the motion we are currently debating in the House. At first glance there are some who would suggest that microcredit could well be the saviour of the world’s poor. It is a concept whereby those living in poverty are given access to small amounts of money by way of a loan that it is hoped will give them the buying power they need to break out of their difficult existence.

Historically the first loans under this scheme were made by university Professor Muhammad Yunus in Bangladesh in the mid-1970s, and the amounts amazingly were $27. Typical loans under Professor Yunus’s microcredit scheme were under $50, while the women’s group Activists for Social Alternatives, based in India, hands out initial loans for amounts as low as $2.70. Under the scheme developed by Professor Yunus through his Grameen Bank, initial small loans that were successfully paid back enabled the borrower to qualify for larger loans. In most schemes the creditors are sorted in groups of around five members. All members of the group suffer if one of their members fails to meet repayment obligations, and this acts as an effective motivator to keep up the determination to strive for success—in other words, people do not want to let down people who they are sorted with because, if they default, then everyone suffers.

The key to this system is the initial small loans to the poor with the overarching belief that with careful management and hard work even a small amount of money loaned to those living in poverty can lead to improvements in the existence of the recipients. If one searches, it is possible to find anecdotes about the success of these schemes. One of Professor Yunus’s early successes was a woman who used one of the first $27 loans to start a bamboo furniture business, which was soon profitable enough to support her family.

A microcredit scheme in China, for example, is where loans are afforded to buy chickens, pigs or goats which are bred to create new stock that are sold to repay the loans. The term of the loan varies according to the type of animal. Chickens, for example, breed and grow more quickly to a sellable size, while pigs and goats take longer to develop. So the loan terms have been set accordingly.

In Bosnia, a village resident who had struggled to make ends meet by selling second-hand clothes was able to take out a loan for $325. She used it to buy clothing which she sold at market and as a result was able to repay her loan within 15 days. For us here in Australia, success stories with a microcredit industry should be a source of inspiration. If those suffering poverty can make a go of it, there really should be no excuse for us, living in one of the world’s most economically successful nations, to at least aim high.

While the World Bank has recognised microcredit as having potential as an agent for development, there are shortcomings. A report from Bangladesh showed that loan recipients ‘tend to use their credit for the same limited range of small-scale activities’ and ‘they soon reach a modest ceiling on the amount they can earn. The reality is that in any given situation there is likely to be only a limited range of economically viable small-scale activities available to the modestly skilled poor and a limited demand for the product of any particular activity.’

It is also noted that microcredit is not a particularly effective generator of employment, which is needed for overall economic growth and stabilisation. There are also concerns that new business established as a result of a microcredit loan may actually create a sort of subsidised competition for existing businesses, thereby destabilising a local economy. One report noted that the Grameen Bank loan recipients had an extremely high rate of loan repayment:

Repayment discipline is strict and subsequent loans to a group are dependent on repayment performance. Repayment rates average 97 per cent ... A comparison of the bank’s members with other poor households shows that the former have clearly benefited from the services provided.

Having said that, the Australian government does support microcredit as a very effective tool for reducing poverty and increasing incomes—but, we stress, in the right settings. Experience has shown that a number of preconditions are needed for microcredit to be fully effective, and these include macroeconomic stability, appropriate financial regulatory systems and enterprise laws, protection of property rights, access by the poor to healthcare and education and key infrastructure such as roads and electricity. In addition to direct support from microcredit, the Australian aid program focuses on supporting these enabling conditions. So the Australian government through the AusAID program does recognise the importance of microcredit. In fact, we support it and we should look at further supporting it. (Time expired)

Bob Sercombe (Maribyrnong, Australian Labor Party, Shadow Minister for Overseas Aid and Pacific Island Affairs) Share this | Link to this | Hansard source

I join the member for Fisher in commending the member for Kingsford Smith for bringing on a discussion of this important matter. It is appropriate to discuss this issue, particularly at a time when matters relating to the quantum of developed countries overseas development assistance are very much on the agenda, and also the issue of the effectiveness and the priorities that that development assistance reflects. Increased levels of and more effective development assistance are vital not just because it is the right thing—the moral, ethical thing—for the developed world to do but because it is overwhelmingly in our interests as well. As the Secretary-General of the United Nations, Kofi Annan, has remarked, you cannot have development without security but, equally, you cannot have security without development. In a world where many hundreds of millions of people live in grinding poverty, the question of global stability and global security is very much in the balance.

It is in this context that issues such as microcredit are critically important—because, as the member for Fisher and the member for Kingsford Smith have already indicated, microcredit works. It works at very localised levels where individuals, families and communities with access to small amounts of credit are able to do things like sow crops, pay for their kids to go to school or capitalise microbusinesses—all things that are preconditions for sustainable reductions in poverty. Microcredit is critically important in those respects.

But, as indicated by the member for Kingsford Smith, despite the comments of the member for Fisher, Australia really lags dramatically in this area. Only some $14½ million in the 2005-06 aid budget was committed for microcredit schemes. This represents about 0.6 per cent of Australia’s aid budget. That compares with the international benchmark set by the United States of 1.25 per cent, which is more than double Australia’s contribution in percentage terms as well as being dramatically larger in real and absolute terms.

In a discussion paper that the member for Kingsford Smith and I were involved in launching earlier this year, Labor put forward a proposal for a Pacific development trust. Such a trust would engage the private commercial sector and non-government organisations along with governments—both the Australian government and Pacific island governments—in systematically addressing the question of access to credit in our more immediate Pacific neighbourhood. That is critically important. I am pleased to say that, since we have launched that paper—in fact, in June this year—an organisation called Microfinance Pasifika Network has been launched. That organisation is involved with not just advocacy but also the promotion of new technology for delivering credit, as well as innovation and best practice for addressing the unique needs of the Pacific region.

A number of Australian commercial enterprises are involved in this network, in particular the Westpac Bank and the ANZ Bank. This network now desperately needs the engagement and commitment of the Australian government—from the very measly base that the Australian government has established in this area—to take things forward. In this context, I particularly want to commend the ANZ Bank, under the chairmanship of Bob Lyon, which has shown extraordinary innovation and capacity in terms of addressing the rural banking needs of many parts of our Pacific neighbourhood. It is a pity that the Australian government is not backing up what until now essentially has been a private sector enterprise in order to really start producing much better outcomes in our own Pacific region.

Other speakers have referred to a more broad based Asian approach to this matter—for example, as with Bangladesh. In March this year, in Beijing, the Asia Microfinance Forum attracted nearly 300 participants. They heard of some very exciting and innovative ways in which not just financial benefits but also technological leading edge stuff can be delivered to developing countries. For example, they heard about a telecom company in the Philippines which has turned mobile phones into electronic wallets to handle remittances, donations, loan settlements, salary credits and bill payments via text messages. This is the sort of innovation that developing countries require and it needs to be translated much more actively into our more immediate Pacific region. However, there are areas where, as I have said earlier and as the member for Kingsford Smith has said, the Australian government is badly lagging. (Time expired)

Jason Wood (La Trobe, Liberal Party) Share this | Link to this | Hansard source

I thank the member for Kingsford Smith for bringing this important motion on microcredit to the House’s attention and I also congratulate the member for Maribyrnong for looking at this as not only a moral issue but also a security issue. The member for Kingsford Smith has raised several issues relevant to the achievements of the Millennium Development Goals. Specifically, he seeks support for the following two propositions: that the Australian government support the goal of 175 million people receiving microcredit by 2015; and that the Australian government increase microcredit funding to 1.25 per cent of the Australian aid budget.

The MDGs are, of course, globally adopted targets for the reduction of extreme poverty. It is widely acknowledged that the continuing availability of microcredit to adequate levels underpins the achievement of these targets. The link between microcredit and MDG 1, which is eradicating hunger and poverty, is perhaps the strongest of all. A World Bank study has shown that microcredit has been responsible for 40 per cent of the entire reduction of moderate poverty in rural Bangladesh.

But what is microcredit? Microcredit is a program of low-interest loans and other financial services, such as savings and insurance, to impoverished people who are unable to borrow through ordinary channels. These loans are usually made to women to enable them to expand or establish small businesses, such as waste recycling and animal husbandry. Microcredit projects supported by the Australian government through AusAID have helped tens of thousands of poor households in Bangladesh, China, Indonesia, Papua New Guinea, the Philippines and Vietnam.

For example, the Capital Aid for the Employment of the Poor, or CEP, project was established in Vietnam in 2001. Average loans provided by CEP are just over $200. These are provided to poor households in urban and rural Ho Chi Minh City. Significantly, 80 per cent of its clients are women. One of the many success stories of this project is Ms Nguyen Thi Hoang. Hoang applied for a $170 loan to buy a sewing machine. At the time Hoang and her brothers were peeling cashews for 34c per kilo. Hoang now earns about $2.50 a day making clothes and has become the family’s breadwinner.

The year 2005 was the International Year of Microcredit. A national committee was established in Australia to increase awareness of microcredit and to lobby for an increase in funding. One of the three groups on that committee was RESULTS Australia, which operates out of Belgrave in my electorate. RESULTS Australia has been a strong advocate of microcredit for some time. Last month I met with Sue Packham and Emmanuelle Emile-Blake of RESULTS to discuss Australia’s progress towards the MDGs. They have met with me on a number of occasions, and I congratulate them on their hard work. Like the member for Kingsford Smith, RESULTS Australia has called for Australia to aim for microcredit to reach 175 million people by 2015 and for an increase in aid funding for microcredit to 1.25 per cent of total aid. This is a view I fully endorse, and I fully support the member for Kingsford Smith’s motion. Microcredit requires a tiny outlay and delivers enormous returns; 1.25 per cent still represents a very small proportion of Australia’s aid budget. If it takes 175 million people being reached by microcredit to achieve the MDGs then that must be the benchmark.

However, Australia’s contribution to date should not be overlooked. In 2006-07 Australia will provide just under $3 billion worth of official development assistance. The current ratio of Australia’s aid to gross national income, GNI, for 2006-07 is around 0.3 per cent, which is above the international donor average and is keeping us on track to achieve the MDGs by 2015. However, I share the view that Australia’s aid should reach the internationally agreed target of 0.7 per cent of GNI by 2015. Ordinary Australians in my electorate are doing an amazing amount of work to reach these targets. For example, the Friends of Ermera focuses its efforts on the Ermera district in East Timor, and Peter Cole is organising his second Operation Sports Airlift to help children in Fiji. (Time expired)

John Murphy (Lowe, Australian Labor Party, Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

I congratulate the member for Kingsford Smith on this motion. It is appalling that poverty is an issue today, as it was decades ago. Sadly, tens of thousands of children continue to die from poverty related causes which are entirely preventable. We in this chamber have a duty to bring to the public consciousness the plight of men, women and children world wide and to find solutions. While Australia became a signatory to the UN Millennium Development Goals with epochal determination to eradicate extreme poverty and hunger, many of my constituents in Lowe have questioned the quantum and nature of Australia’s foreign aid commitments. I have previously raised my concerns with the Minister for Foreign Affairs that too large an emphasis has been placed on governance programs, rather than on basic poverty reduction, in developing countries. This much was reflected in a recent survey by the US think tank the Centre for Global Development, which ranked Australia 15th out of 21 of the world’s richest countries for the proportion of national income dedicated to foreign aid.

The size of Australia’s aid program, as well as that of many other developed countries, has led many to rightly question whether the laudable Millennium Development Goals are slowly slipping out of reach. It is difficult to remain optimistic when we know that tens of thousands of children are still dying from poverty related causes and billions have little or no access to basic health care and nutrition. To the minister’s credit, under the aid white paper we have seen a welcome increase in Australia’s aid program from 0.28 per cent of gross national income to 0.36 per cent by 2010. Nevertheless, the Labor Party believes Australia’s contributions should be greater. There is no logical reason why we cannot join, hand in hand, with the many other OECD countries that have committed 0.7 per cent of their gross national income to change the lives of the poorest and most vulnerable members of our global community. However, this is a debate for another day.

Despite the current government’s increase in Australia’s aid budget, concerns still arise as to how this aid will be spent. There can be no doubt that the quality of aid contribution is just as important as aid volume. It is in this light that I wish to speak in glowing terms about microcredit financing. Microcredit promotes the use of small, collateral-free loans to help impoverished families set up small business ventures and to assist with self-employment. In some of the poorest villages in the world’s poorest countries, we have seen millions of families use these loans to build businesses and futures for their communities. Brett Kuhnell, from World Vision Australia, provided an example of this last year: a sandal maker in Burma who borrowed $40 developed a business which now hires eight locals to sell 80 pairs of sandals a day. Such examples are by no means unique. An eight-year World Bank study in Bangladesh found that 48 per cent of the poorest households with access to microcredit loans rose above the poverty line. In The End of Poverty, Jeffery D. Sachs said:

At the most basic level, the key to ending extreme poverty is to enable the poorest of the poor to get their foot on the ladder of development. The ladder of development hovers overhead, and the poorest of the poor are stuck beneath it. They lack the minimum amount of capital necessary to get a foothold, and therefore need a boost up to the first rung.

This is the very boost that microcredit provides, such is the potential for microcredit to empower the poor and facilitate a way for them to rebuild their own lives. We cannot allow the concept to expand at a snail’s pace. We must do all we can to broaden access to microcredit loans. Yet the pool of money available for microcredit lending is not large enough and must increase. That is why this motion is so important. As the member for Kingsford Smith said a moment ago, the Howard government must do everything it can to increase the proportion of money it allocates to microcredit to 1.25 per cent of the aid budget.

While it would be a noble thing to increase Australia’s aid and microcredit budgets in their own rights, the Howard government would need not think it were doing so purely for altruistic reasons. There are common-sense arguments to suggest that achieving national security is not entirely possible without taking real action to eliminate poverty. While I do not suggest that poverty and terrorism are inexorably linked, the Howard government cannot continue to preoccupy itself with a narrow and one-dimensional approach to national security. We cannot deny that poverty, combined with the absence of education, has fuelled the capacity of terrorist organisations to recruit people to their cause. It cannot be denied that Australia’s fate is inexorably linked with the fate of the majority of the world’s people, including those in our region, who live in countries that are struggling with poverty. We cannot leave the door open for extremists to recruit from the poor and marginalised, no matter how remote this proposition may seem to some.

In an era of economic prosperity, Australia cannot continue to ignore the growing disparity of wealth between rich and poor nations. It is in Australia’s interest to do more to fight global poverty. Fighting the scourge of global poverty is certainly not a panacea for the scourge of terrorism. However, it would be appalling in the extreme if, with the benefit of hindsight, we came to realise that the most effective antiterrorism strategy could have been a $40 loan to a man or woman who was simply looking to feed his or her family. (Time expired)

Phillip Barresi (Deakin, Liberal Party) Share this | Link to this | Hansard source

In the very short time I have to speak on this motion, I would like to say that history has shown microcredit to be an effective tool for reducing poverty and increasing incomes in the right settings. I would like to take this opportunity to highlight two organisations that have done considerable work in the area of microcredit. The first, World Vision, is located in my electorate and is headed up by the Reverend Tim Costello. The second is Opportunity International, and I have had a number of dealings with it over the years. Both organisations are amongst several hundred that are involved in extending microcredit facilities to people in impoverished nations. Microcredit organisations such as Opportunity International and World Vision provide microcredit—

David Hawker (Speaker) Share this | Link to this | Hansard source

Order! It being 1.45 pm, the debate is interrupted in accordance with standing order 43. The debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting. The member will have leave to continue speaking when the debate is resumed on a future day.